I'm the Founder and Managing Partner of Ironfire Capital LLC, which runs a tech-focused hedge fund and angel fund. I did a Ph.D. in Management at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management. You can follow me on Twitter @ericjackson, subscribe to me on Facebook, follow me on Sina Weibo, or Circle me on Google+. My email is: dr.eric.jackson@me.com

Why Apple Will Hit $1,650 by the End of 2015

The logo for Apple Computer, now Apple Inc.. The design of the logo started in 1977 designed by Rob Janoff with the rainbow color theme used until 1999 when Apple stopped using the rainbow color theme and used a few different color themes for the same design. (Photo credit: Wikipedia)

With every new $100 level increment in Apple‘s (AAPL) stock price, we hear a chorus of worrywarts on business TV saying it just can’t continue. It’s unprecedented, they say. Apple’s now too big. Steve Jobs is gone. Everyone likes it. It’s a bubble.

Yet, no company this big before has ever had the opportunities and relatively low market share that Apple now has. And Steve’s greatness actually masked how good the rest of the team is.

We’re at $600 now, but I think Apple has much further to go from here. If things play out as I expect, Apple will hit $1,650 by the end of 2015. Here’s how.

Macs:

This is the most ignored part of the Apple portfolio. It has consistently grown faster than the PC industry. Macs grew their revenues 26% Y/Y in the last quarter and 22% for the last fiscal year. Macs’ growth rate is actually increasing over time. The Apple halo effect is truly starting to take hold.

And PCs aren’t dead yet. The PC industry grew at 10% last year. As of today, Macs represent only 9% of the PC market.

If the growth rate continues, Macs could sell 55 million units in 2015 – up from 17 million last year.

iPads:

It’s hard to believe this is a new category created from scratch 2 years ago and is now 20% of Apple’s revenues. (Remember most thought it was a dud 2 years ago and fixated on the “dumb” name? Jobs, himself, was depressed with the initial reaction.)

55 million iPads have been sold since inception. There will likely be 58 million iPads sold this year alone.

It’s clear that Apple is trying to achieve iPod-like market share with the iPad – not iPhone-like market share.

Many estimate 500 million tablets will be sold in 2015. It’s not so hard to envision Apple retaining a 60% share and selling 300 million iPads then.

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recurring payments? You don’t think consumer electronics requires recurring payments? I sure hope your smart phone will last you another 10 years. Good luck with that. It sure won’t ve very smart in 10 years . . . that’s for sure.

Apple is my “bank account”. Every once in a while I sell some shares and a few months later the stock goes up and it’s like I never touched the money. Been doing this for years. Apple is supporting my family. I’m thinking of buying more at 580 or so if I have the chance. Apple is a great business and much bigger then 1 man. Steve was the man but nothing is forever. Apple will continue to rock, at least for now and I believe for a very long time. I stay away from options with apple because I can’t read the future. I do sell covered calls when I decide to sell shares. I believe the average guy like myself is investing in a manner that is similar to gambling and the house always wins. The rich guys who control huge amounts of shares of companies can really do a number on the price of a stock not to mention what happens when wall st. starts touting or certain companies. The average guy doesn’t stand a chance but every once in a while we get a break and apple is that break now – especially for those who have been buying shares over the years. I have made more money with Apple in 1 year then in 10 years with J&J or PG.

Eric. You are absolutely right on as usual. With one observation if I may add. It’s the closed “Eco System” Steve Jobs brilliantly envisioned 35 years ago, before he created the products that now fuel the engine that allows all of this to unfold. He always thought that Gates was wrong about that and now he is proved correct. Shame on all of us who also didn’t believe or understand what he was saying and shoulda coulda woulda bought more stock when it was under $20 in 2000….or $3.48 in 1984!

AAPL is a big juicy octopus, pulling in money with each one of its many tentacles. When I retire, it is going to offer me a lavish banquet, which I am already savouring with my eyes each day as the stock price jumps higher than the day before. YUM YUM.

2015 is too far away to predict anything with accuracy. Any product release can make or break Apple’s share price. Wall Street isn’t interested in anything else that Apple does. There is always going to be a firm belief that Apple’s next product release will be a failure rather than a hit. And the new product better sell more units than the last version or the share price will drop. Apple investors pretty much doubt that Apple will continue coming up with top-selling products. I think that’s why Apple’s P/E continues to shrink. I certainly don’t see Apple’s share price even reaching $1000 in three years. $800 maybe. I hope I’m proven wrong.